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Understand More About ABSD and How To Lower Your Liability?


Property ownership in Singapore is a hot topic.


Prices have been going up steadily despite market downturns and pandemics.


Additional Buyer’s Stamp Duty (ABSD) was first introduced in December 2011 to cool the property market and discourage foreigners and entities from purchasing multiple residential properties.


The ABSD rates were revised upwards in January 2013 and included more buyer profiles to stabilise the market that was going out of control and prevent speculation. The latest revision in the rates happened in July 2018 and have remained unchanged since.


In today’s article, we will look at several ways to reduce your ABSD when acquiring additional property.


So, what is this is ABSD?


It is a tax that's levied on top of Buyer's Stamp Duty (BSD).


In Singapore, when you purchase a property, you have to pay a buyer’s tax.


ABSD is an additional tax to pay when purchasing multiple residential properties. It is computed based on the valuation or the selling price of the property, whichever is higher.


The current ABSD rates are as follows:


Free trade agreements



If you are a national or permanent resident of certain countries, you are exempt from paying ABSD for the first property purchase.


Under the respective FTAs, Nationals or Permanent Residents of the following countries will be accorded the same Stamp Duty treatment as Singapore Citizens:

  • Nationals and Permanent Residents of Iceland, Liechtenstein, Norway or Switzerland

  • Nationals of the United States of America

Buying under one owner’s name


Usually, people buy a property as a home, as a couple. However, if both are first-time property owners, you can consider buying the property under one owner’s name.


This would allow the other party to buy another property without having to pay ABSD, as it is also a first-time purchase.


The setback is that the sole owner will have to bear the housing loan and repay the monthly instalments for each property. This can only happen if both spouses are financially stable.


Decoupling


For those who already bought a property as a couple, you can decouple the property.


What it means is that one you transfer your share of the property to the other party, making him/her the sole owner. This will allow the other party to purchase another property as a first-time buyer, thus avoiding paying ABSD.


However, there are several important things to take note of.


Firstly if you transfer your share to your spouse, it means that your spouse is buying your share of the property, and that means having to pay Buyer’s Stamp Duty (BSD).


As for yourself, who is selling your share within 3 years of purchasing it, you will also have to pay Seller’s Stamp Duty(SSD).


Add all the stamp duties in, plus conveyancing fees, penalties for early redemption of mortgage and other admin fees, you may end up paying more than the ABSD of buying a second property.


So for investors thinking of going this route, you have to do your sums carefully to avoid paying more.


Also, as in the above point, both parties will need to be financially stable to bear the housing loans and repaying the monthly instalments.


Here is the current BSD and SSD rates:



Upgrade to a new Executive Condominium



The dream of most Singaporeans is to upgrade from an HDB to private property.


Doing this, however, will incur ABSD within 14 days of signing the Sales and Purchase Agreement.


You will be able to apply for an ABSD remission if you sell the HDB flat within 6 months.


You can avoid this step altogether if you upgrade to an executive condominium (EC) instead.


ECs are a hybrid of public and private housing. They resemble private condominiums and are enclosed within a gated compound with security, amenities like swimming pools, clubhouses, playgrounds etc.


The important thing to note is that you have to sell the HDB flat within 6 months after collecting the keys to the EC, or when it receives its Temporary Occupation Permit (TOP).


Dual-key units


Source: Park Colonial 2 Bedroom Dual Key


A dual-key unit is a single property unit comprising 2 separate living spaces sharing the main door and common foyer. Developers and agents often marketed them as 2 for 1, meaning you get 2 units for the price of 1.


The sub-unit of a dual-key unit is not considered a second property and therefore not subject to ABSD.


The setback here is that dual-key units are often priced higher than regular units in terms of per square foot (psf) and in certain developments, can cost at least 20% more.


Recent developments with dual key units include Park Colonial in D13. Which is developed by the CEL Group. For those looking to live in the West Coast of Singapore, units are available at Whistler Grand in D5, by renowned developer CDL.

Buy under your child


Many rich people are buying properties under their children’s names as a way to avoid paying ABSD.


It is also a form of leaving assets to the next generations. But by doing this, in the future, these children will not be able to meet the criteria to apply for a BTO (not that they will likely need to).


Owning a private property would most likely disqualify them from receiving government subsidies such as GST vouchers etc.


Commercial properties



Investing in Singapore commercial properties became more popular after the Government implemented cooling measures on the private residential properties in 2011 and 2013.


And with the recent implementation of the Additional Buyer's Stamp Duty or ABSD for private residential properties, there is even more interest in commercial properties. Commercial properties in Singapore are seen as an attractive investment to many right now.


Unlike residential properties, you do not have to pay any ABSD when you buy commercial properties. Besides that, commercial properties also command higher rental yields of 5% on average compared to 2% to 3% for residential properties.


However, for certain types of commercial properties such as shophouses, take note that for shophouses that come with residential use, ABSD may be payable on the residential component of the shophouse.


Lastly, commercial properties come with their risks; for instance, they cost more than residential properties and may also require more cash outlay as the downpayment can only be paid using cash and not CPF monies.


So, there are several ways to avoid paying ABSD, and for property investors, the ultimate goal is profit, asset growth and capital appreciation. For every way to avoid paying ABSD, there are also setbacks, it is important to do your due diligence and decide if that way is the right way for you.


For more property news, resources and useful content like this article, check out Mogul.sg blog here.


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